BRUSSELS, April 19, 2010 (RISI) -When others were predicting its demise, Longview Fibre Paper and Packaging, Inc. president Randy Nebel confidently predicted: "We will be a survivor."
Thanks to a concerted effort (and sacrifice) by all at the mill, his optimistic prediction has thus far been proven correct.
Opened in 1927 in Longview, WA, close to the Oregon border on the U.S. West Coast, the mill probably was on the way out prior to its purchase by Brookfield Asset Management (Toronto, Canada) in April 2007 if significant changes were not made.
The Longview mill has come a long way since Brookfield acquired it in 2007 (Photos by Dave Davidson)
For just over $2 billion, Brookfield received 588,000 acres of prime woodlands in Washington and Oregon as well as the sprawling 357-acre mill site. The purchase also included a network of corrugated container plants across the US. One of Brookfield's main business lines is timber so although the woods may have been the prized asset, the company saw possibilities in the mill, according to Nebel. "The mill was a diamond in the rough."
He adds that the mill was a good candidate for takeover because it was not really looking for a large influx of capital. "It just needed to be better operated."
Nebel says the "rank and file" knew something had to change. "When they saw Brookfield was willing to spend some money, they got on board because they felt Brookfield believed.
"The people got involved and made it successful. There were a lot of rapid changes, which helped. Brookfield figured out quickly what had to be done and acted."
Nebel adds that the people, union and salaried, were "committed to doing the right thing. They did not back down from any challenge."
For example, PM 10 was running at 2,000 ft/min in 2007. Now, it runs at nearly 2,900 ft/min.
As with many mills of its era, it was a vast complex with myriad pieces of machinery. At one time, in the pulping area, it had a wide range of cooking vessels including two continuous digesters, seven batch digesters, and cookers for NSSC. Now, it runs two continuous digesters (Kamyr units, K1 and K2), the M&D digester, which runs on sawdust, and the NSSC cookers that use hardwood chips.
The mill also has two recovered fiber pulping lines: one OCC (1,000 tons/day, post-consumer) and one double lined clippings (DLC), producing 200 tons/day from post-industrial waste.
It's a similar story throughout. Twelve paper machines have become five with two more available if markets dictate. PM 6, one of the reserve machines, can produce 164,000 tons/yr of roll pulp and linerboard. It was shut in November 2006 and restarted in August 2009 until Longview decided to mothball it in January 2010. The machines running are PM 5, PM 7, PM 10, 11 and 12.
Longview runs one recovery boiler, down from three although one is in reserve. The mill operates two power boilers, down from five with two of the shuttered units kept on availability.
The mill operates two lime kilns with one more in reserve. Two others were permanently shut.
At present, the mill can produce 1.6 million tons/yr of pulp and 1.3-1.6 million tons/yr of paper: kraft and corrugated. Based on markets, the 2010 paper production budget is just under one million tons (380,000 tons of kraft paper and 620,000 tons of containerboard).
Nebel makes one important point. With the closure of older equipment and the money that has been invested in the remaining assets, he says that Longview is really a post-1990 mill, other than for the paper machines. The company states that there are no critical lifecycle issues. Nebel adds that potential incremental growth capacity is 5-6%/yr compared with 1-2%, which is normal for most mills.
Longview is North America's largest kraft paper packaging papermaker. It can produce 70 grades with a range of recycled content (0-100%). Sales by product segment are high-performance multiwall (25%), a sector in which it calls itself one of the world's lowest cost producers; multiwall (10%); containerboard (25%); kraft bag (20%); and, converting and specialties (20%).
The focus is on lightweights, high performance and flat multiwall and complementary specialty papers. "We are the biggest medium producer on the West Coast," Nebel says. "Box shipments in the region have not gone down compared with the rest of the US."
This is a large agricultural region and as Nebel says, as long as people continue to eat, there will be a demand for packaging.
The mill uses purchased chips as well as roundwood in its furnish
Changing the culture
When Brookfield took over, it realized work needed to be done. Fortunately, it had the backing of the workforce. Still, to get costs in line, cuts had to be made. In 2010, staffing levels are about 67% of what they were in 2007, which translates to 500 fewer jobs. More reductions are needed but this will come through attrition.
Brookfield is concentrating on "fundamental drivers": operating configuration, machine efficiencies, fiber yield and energy utilization. Nebel says the mill still has a ways to go with the latter. Improved process control is also a goal. Finally, Brookfield wants to align Longview with best-in-class world benchmarks, which would mean a 40% increase in productivity.
The transformation of the mill included a huge improvement in safe working practices and environmental performance. There has been a fourfold reduction in the safety and environmental incidence rate compared with pre-Brookfield levels.
Safety and environment are the foundation of Brookfield's "architecture", whose pillars include operational excellence, capital management and commercial excellence. To attain success, Longview leadership believes the mill must move to a "performance-based culture" with clearly defined ownership and accountability.
Bookending the architecture are two visions: to be the best in procuring fiber and to be the best in the industry in marketing.
The fiber situation is quite good at the moment. Nebel explains that the U.S. northwest wood product industry has invested so there are some very efficient sawmills that run at a low cost. "We get what we need at a fair price. When the housing market comes back, the northwest could have lower cost fiber than southern US mills."
As well as purchased mixed chips, Longview also uses hardwood and softwood logs. Although it is part of Brookfield, which has massive woodlands holdings, Longview does not receive any "sweetheart" deals from its parent. It must purchase its own timber from whomever it can get the best deal.
Longview president Randy Nebel says the mill’s workforce is “committed to doing the right thing”
In the mill, Longview has a number of projects going on or recently completed. Earlier this year, it spent $2 million to upgrade the No.11 kraft paper machine. Designed to improve quality and increase capacity, the work included adding several new dryers with polishing doctor blades to improve stretch and tensile energy absorption (TEA). A new press steam box was installed to improve the sheet moisture profile. The steam driven turbines were upgraded with electric motors and gearboxes. The pulp refining system was modified to increase throughput.
PM 11 can now produce 160,000 tons/yr of Longview's TEAKraft semi-extensible paper and its recently introduced FibreShield® high-performance extensible sack kraft paper (see sidebar). FibreShield is said to offer a 30% improvement in TEA over Longview's earlier products. This allows fewer plies and lower sack weight for the same strength. End uses include cement, flour, pet food and chemicals.
The move came at a judicious time for Longview as about the time the project was finished, one of its competitors, Eurocan (Kitimat, BC) closed permanently.
One of the biggest projects planned is waiting for regulatory approval. The mill wants to install a 650,000-lb/hr steam biomass boiler as well as a 65-MW condensing turbine. One existing extraction turbine will also be used.
Nebel says some of the mill's existing boilers are not efficient and nearing the end of their life. "This is the right thing to do for the environment. The new boiler will have significantly lower emissions than the mill's other biomass boilers."
The project has been scheduled for a long time, Nebel says, adding that he is hoping approval will be given before summer as environmental permits are received. It is hoped the boiler will be online in the third quarter of 2011.
It will burn 38,000 bone dry tons/month of biomass. About 60-70% of that need is produced onsite. The rest should come from within a 50-mile radius of the mill.
After startup, this will be the mill's only biomass boiler and only one recovery boiler, No. 22, will be kept operating.
The recovery boiler has a capacity of 4.3 million lb/day dry solids. Longview applied for a permit to fire at a higher limit; however, the US Environmental Protection Agency (EPA) has told the Washington Department of Ecology that it can't approve the request. Longview continues to work with the Department of Ecology to understand what the company may be allowed to do. With a "little" work, Nebel says that No. 22 can increase its capacity by 10%.
The electricity generated will qualify as "green power" and should provide a stable revenue stream. "We have an advantage," Nebel explains, "because Brookfield is a large energy producer and understands the sector very well."
On the pulping side, as noted, the mill has two digesters but is currently running one: K2. The other, K1, has a production capacity of 1,100 tons/day. It is being maintained and Longview hopes that markets pick up so that it can be put back into service.
The K2 unit has a production capacity of 1,200 tons/day but it has hit 1,360 tons. Longview has made numerous improvements to its pulping process recently. It has converted to down flow low solids cooking. Standard deviation has fallen to 2-3 from a peak of 6 in 2007. Stabilizing the digester has helped the paper machine tremendously.
Yield is currently about 50% but the mill is aiming to improve that figure to about 55%. The mill produces three pulp grades to match customer and market needs. The pulps differ in kappa number and furnish.
The mill's recovery boiler, No. 22, has also had a fair bit of work done on it, particularly in the controls area. A MACS model predictive control (MPC) system was installed and this has resulted in a significant cost reduction from sulfur dioxide control and reduced upper furnace plugging.
The system includes MACSestimator soft sensors for liquor heating value and blackout prediction. The system was integrated with the mill's distributed control system and PARCview for simplified training and performance monitoring.
Nebel adds that the mill is also doing a lot of work toward being more chemical and energy efficient. A white water project that covered the entire mill was "very successful", according to Nebel. "We burn less fuel and use a lot less water, six million gallons/day. We closed a lot of loops. We took out enough Btus to shut a boiler."
Pami Singh, general manager, optimization and control, says the project sets the mill up to do further optimization. "This was probably the first big project we can springboard off of, " he adds. We look at the white water project as Phase 1. Phase 2 will be energy conservation."
The mill is North America’s largest kraft packaging paper producer and is innovative in its product development
Have a "hunger"
Longview believes in technology. Singh's group has multiple control engineers. The company has a strategic plan, Singh adds. "As part of the plan's development, we bring simulation and process know-how to help invest the capital in the wisest way.
"We look at a millwide economic model to do a ‘what if' scenario. Most money can be made at the back end (e.g., chemicals, fiber). If we give a consistent product to the paper machines then they will deliver a consistent product to the customer."
Singh gets involved with operator training as well. "Our operators have shown a hunger for knowledge. The challenge is to make the operators know the ‘why' of something. This is what I mean when I say the operators have the hunger. One of the key goals for 2010 is getting the operators to think things through to make decisions." (That is, having the decision makers at the lowest level.) It's possible, but the key factor is to ensure that we build the competency at the lowest level.
With the vast range of equipment in the mill, Singh says one of his biggest tasks is the need "to understand all the variability. We need to get the instrumentation up to speed and try to digitize it all. We have to be able to measure it in order to control/improve it."
Ultimately, it comes down to managing waste: fiber, energy, chemicals, water. Minimizing losses means money in the bank. "Nothing is too big and nothing is too small," Singh adds.
Currently, Singh is involved with the simulations for the proposed new boiler. "We are projecting steam balances up to 2013 as well as thermal and electrical loads in the future. We need to understand the strategy, ensure it is the right thing to do and then, when its starts up, ensure it is done well and optimize as needed.
The money for the new boiler and other capital expenditure (capex) plans rests in the hands of CFO Heidi Pozzo. Of course, she does not act alone. "Randy and I sit down every quarter and go through the capex requests."
All proposed projects received a "fair bit" of review. Pozzo is also responsible for the mills' procurement group. "We need to ensure we get the best value from any project. There needs to be a disciplined process around it."
Generally, to receive discretionary dollars, a project needs a quick payback. Due to the mill's setup and age, a lot of attention is paid to maintenance. The mill has significantly reduced its maintenance costs, but it still has a long way to go.
Pozzo credits Brookfield with doing a great job with the restructuring. As a result, Longview is doing well and operates on its own. "We found out where our cash drivers are and we are now maximizing cash flow. One great benefit is that we have been able to bring down debt."
The “diamond in the rough”
Looking beyond boundaries
Matt Elhardt is marketing director. As noted one of the bookends to the company's development strategy was to be the best in the industry in marketing. "We have looked outside our boundaries," Elhardt explains. "We were too insular before."
As a result there has been a significant upgrade in market intelligence covering such aspects as products, markets, customers and competitors. The mill also feels it does a better job of matching fiber properties with the end product. This goes hand in hand with developing new products that build value.
"We see a need for a mix of domestic and export clients," Elhardt adds. Some 50-60% of the mill's production is board for its own box plants and the open market. Of the remaining paper production, 15 to 20% is usually destined for export. This depends some on the economy. The mill was exporting more before the global economic downturn because of the weak US dollar. Exports are still relatively lower because of the continued recession.
Elhardt says that Longview will focus in the markets that bring the highest return to the mill. "We want to be the best containerboard supplier on the West Coast."
Longview wants to be Number 1 or 2 in the markets it competes in. But, says Elhardt, that requires a good understanding of the market and how you segment your products.
"We look at market growth perspectives and where we can compete. You have to be willing to exit markets." After the buyout, Longview exited some 150 grades.
But, new products in strategic markets and capex spending showed Longview's customers that it was here to stay.
Now, three years after Brookfield took over, Nebel feels the biggest challenges are behind them. Operating margins have improved sequentially year over year. The mill has been able to find non-capital productivity and efficiency improvements. It is on its way to being a low-cost producer of its chosen products. As a result, Brookfield has stepped up discretionary capex to increase margins and reduce costs.
"We've gone from non-profitable to profitable in the time Brookfield has owned us, even in the downturn. We can even fund our own capex now; we don't have to go to the parent," Nebel says.
It's no wonder that the strong sense of accomplishment in what has been achieved in three years leads Longview to believe that its biggest opportunities are still in front of it.
The making of a product
|In any industry, a company has to be innovative with its products, says Elhardt. “You have to be in front of the market and be able to help customers.”
FibreShield was pushed by two to three “key drivers”, according to Elhardt. One was the increasing trend to lower basis weight for sacks. Another was the global downturn, which was the impetus to produce a better sheet to differentiate Longview’s offerings. FibreShield is used or high speed converting and filling lines that need excellent tensile energy absorption (TEA) and optimum strength properties in machine and cross directions. “There is good fiber in the Pacific northwest for this type of paper, Elhardt explains. And, specialized converting paper has been a strength of Longview throughout its history.
It is used for two-ply bags, which compared to conventional three- or four-ply paper used for applications such as cement and pet food, means lower basis weight and thus, less paper.
Singh explains that the development of FibreShield evolved through Longview’s TEAKraft paper. Market intelligence showed there was an opportunity in this particular market segment. “We defined the parameters for the product and then formed a group to see how we could realize the goal.”
The FibreShield team was multidisciplinary and included marketing, operations, technical and management people. “We identified what the best fiber mix would be; what the best chemistry would be to get the required properties and what the best refining strategy and technology between high and low consistency would be.”
Still, Singh says the work is not finished, despite what has been achieved already. “We knew where we wanted to get to and worked to reach that goal. Now, we are looking at what we can do to further develop the product.”